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Energy Bill to Cap Corn's Ethanol Role (12/15/2007)

Date: December 15, 2007

Author:  Joshua Boak

Source: Chicago Tribune

By promoting motor fuel made from corn cobs, wheat stover and prairie grass, the Senate energy bill elevates the chaff above the grains.

The bill passed Thursday pivots ethanol production toward the husks once written off as waste. Of the 36 billion gallons of renewable fuels ordered for vehicles by 2022, 21 billion would come from biomass diesel and cellulosic sources that are still under development.

With legislators expecting the bill to become law, the measure would suspend the food-versus-fuel debate by slowing the growth of corn-based ethanol as it nears a 15-billion-gallon peak. In return, it provides commercial opportunities for finding new ways of unlocking ethanol from a harvest's remainders, reinforcing a young industry that views its chief adversary as big oil.

"There is a recognition that we need to get to these more advanced biofuels in order to have sustainability in this sector," said John Howe, vice president of public affairs for Massachusetts-based Verenium, an ethanol developer. "What the industry really needed was this signal from the government that the market framework would be there."

Howe said companies like his know how to make cellulosic ethanol in the laboratory, but the bill encourages businesses to figure out how to commercialize the technology.

"We're in the process of traversing what is known as that valley of death," he said.

Ethanol refineries currently have a capacity for 7.26 billion gallons, with an additional 6.2 billion gallons of capacity under construction. Almost all of that capacity is for corn-based ethanol and places the product within 3 billion gallons of the 15-billion-gallon ceiling.

Matt Hartwig, a spokesman for the Washington-based Renewable Fuels Association, said the feed, high-fructose corn syrup and export markets for corn limit how many bushels can be devoted to ethanol.

The Senate bill will do for ethanol derived from wheat stover what the Energy Policy Act of 2005 did for corn-based ethanol, Hartwig said. That law mandated that 7.5 billion gallons of ethanol be mixed with motor fuel by 2012, a deadline that increased corn and food prices as more acreage went for ethanol.

The sudden burst of inflation raised fears that our vehicles might burn through our food supply.

Prices for food and beverages are up 4.7 percent over the past 12 months, according to the Bureau of Labor Statistics.

By contrast, those prices grew by less than 2.6 percent during each of the past three years.

But inflation fears can now be quelled because the current bill ends ethanol's exclusive relationship with corn, said John Ranieri, vice president and general manager of applied biosciences at DuPont.

The 205-year-old chemical company is researching how to make cellulosic ethanol more cost-effective to produce. Ranieri credited the government for funding much of the research, saying: "Good policy drives good behavior in the marketplace."

Ethanol companies are optimistic that they can make cellulosic ethanol commercially viable.

"Yes, it's in the development stage, but it's doable," said Chris Standlee, executive vice president of Abengoa Bioenergy in Missouri. "We have a pilot plant in York, Neb., where we've already produced ethanol from wheat straw and corn stover."

Standlee said Abengoa intends to ramp up its commercial cellulosic ethanol plant in western Kansas by 2010.

The bill would boost the volume of motor fuels descending from ethanol by a factor of five, which Rodney Weinzierl, executive director of the Illinois Corn Growers Association, said would benefit consumers by providing a degree of competition to the oil industry.

"By putting more gallons out there, even now, we're keeping the price of gasoline from going higher," Weinzierl said.

Ethanol futures at the Chicago Board of Trade held their months-long climb Friday at $2.04 a gallon after landing below $1.55 in late September.

Corn futures have followed a similar curve, closing up 3 cents Friday, to $4.38 a bushel.

 
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